Rising prices giving food for thought

Inflation is on the rise again. Even though interest rates might come down, we are likely to feel we have less money to spare each month due to the increasing price of food and energy.

According to the The Independent, the United Nations' food price index rose by about 40 per cent in 2007, following a 9 per cent increase the year before. Bread prices rose by 7.5 per cent last year and this year will see even greater increases. Cheese and eggs went up by 15 per cent. Cereals have risen by 12% whilst milk globally has leapt by 60% (not that that has been the case in UK where prices have risen by around 15% for milk). Butter prices rose by 40% in Europe.

So is there any good reason for these price rises...? There are and furthermore they are unavoidable, to some degree.

The high price of energy is certainly a contributory factor. Crops need fertilisers to grow and natural gas is heavily involved in their production. High fuel prices also mean that it costs more to get the food to market, which is reflected in its retail price. Greater demand for meat and dairy products from the growing economies of China and India, as their citizens adopt a more Western diet, is also a major factor.

The rush to biofuels by the European Union and America is making matters much worse. Planting crops for fuel takes land out of food production. One third of the US maize crop was used to make ethanol last year, thanks to massive subsidies from the Bush administration. It would be one thing if this was good for the environment, but there seems to be little to be gained from biofuels in this respect. The most recent studies suggest that their benefits have been vastly exaggerated.

So what have been the consequences across the world? Whilst in England it is an annoyance or might even cause hardship for some, around the world the impact is much more life threatening. Thousands of people marched in Mexico City last year to protest against the increase in the price of corn tortillas, which have soared by 400 per cent. The situation is even worse in low-income Asian and African nations, where grains make up about 60 per cent of the diet. Millions are at greater risk of malnutrition because they simply cannot afford to buy any food. If there are set budgets for food aid and food costs twice as much, there is only half the food aid. People are starving.

What we must not forget is that in the UK, food prices are unnaturally low. Since the war, food prices have only gone one way and that has been down. So low in fact that many producers get even less than the cost of production. There is a farming crisis in this country as was seen in the recent British Pig Farmers demonstrations in London in March. Most dairies have already gone out of business and trying to pay fairer prices is too late.

Sixty years ago an average British family spent more than one-third of its income on food. Today, that figure has dropped to just one-tenth. Whilst we think food is expensive, some of the food increases are that pricing is just catching up as supermarkets can no longer get away with "screwing down prices".

The futureThe problem of rising food prices is likely to get worse, rather than better. The US plans to double production of biofuels by 2022 and the EU has a target of getting 10 per cent of fuel from plants by the end of the next decade.

The UN expects developing countries to consume about 30 per cent more beef, 50 per cent more pork and 25 per cent more poultry by 2016 as more affluent Indians and Chinese want a more Western diet. The amount of land needed for 1kg of meat is much greater than that needed for 1kg of vegetables.

Further down the line, significant disruption to agriculture is expected to be inflicted by climate change. Indeed, this may already be occurring. The failure of Australia's wheat harvest last year was likely to have been a direct consequence of global warming. Increasingly large areas of low lying land are simply being flooded and farming land lost as has happened in Bangladesh over recent years.

To some extent, higher food prices are inevitable. Nothing is likely to prevent Chinese and Indians diversifying their diet, for instance. Serious action must be taken to protect the most vulnerable on the planet from rising food prices. More generally, it is clear that global leaders and multilateral organisations need to become a good deal more adept in making provision for rising global food demand as the population and demand is only going to grow.

The supermarkets have insulated many Britons from the reality of the food increases as they negotiate food prices for up to 2 years ahead. Their prices will go up soon and they will pass these on in the coming year. Grain reserves are also diminishing - they are their lowest in 37 years.

Yes the days of cheap food are over – and we had all better start getting used to it. The food we sell is quality and we would encourage customers to buy quality, locally sourced food, to reduce meat intake, to eat more seasonally and buy more regularly reducing the 30% or so of food which many throw away. All these steps will reduce your food bill without cutting quality. We will continue to meet your needs and promote quality food, fair pricing and green retailing.

Copyright The Local Food Company (some of this article is based upon articles in The Independent, The Guardian and The Times in March) 2008

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